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Gold Tops $1,770 After Fed Announces QE3 to Boost Economy

Gold topped $1,770 an ounce for the first time since February after the Federal Reserve announced a third round of round of quantitative easing to boost the U.S. economy and reduce unemployment.

The central bank said today that it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month. Gold jumped 3.1 percent last week amid speculation that the Fed would announce measures to stimulate economic growth, increasing demand for the metal as an inflation hedge.

“Prices are reacting to the Fed’s announcements,” William Rhind, the managing director at ETF Securities in New York, said in a telephone interview. “The inflation worries will be back because of ‘open-ended purchases.’”

Gold futures for December delivery rose 2.2 percent to settle at $1,772.10 at 1:34 p.m. on the Comex in New York, the biggest gain since June 29. Earlier, the price reached $1,775, the highest for a most-active contract since Feb. 29.

“If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases and employ its other policy tools as appropriate,” the Federal Open Market Committee said in a statement.

Gold surged 70 percent from the end of December 2008 to June 2011 as the Fed kept borrowing costs at a record low and bought $2.3 trillion of debt in two rounds of quantitative easing.

The metal may climb to a record this year on demand for a haven amid concern the global economy will falter, Rhind said. Gold surged to an all-time high of $1,923.70 on Sept. 6, 2011, partly because of Europe’s debt woes.

Silver Jumps

Silver futures for December delivery jumped 4.5 percent to $34.778 an ounce, the biggest gain since June 29. Earlier, the price reached $34.87, the highest since March 5.

On the New York Mercantile Exchange, platinum futures for October delivery increased 1.8 percent to $1,679.50 an ounce. Earlier, the price reached $1,691.40, the highest since March l6.

Palladium futures for December delivery rose 1.4 percent to $689 an ounce. The metal climbed for the ninth straight session, the longest rally since April 2004.

To contact the reporter on this story: Debarati Roy in New York at droy5@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

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